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My development logbook

Investment Survival Note 5 - How to Invest for Your Captial Appreciation

One should not invest for the sake of “being in the market” or “Income”. When one is making stock selection, he/she should take both income and potential of appreciation into account.

The only way to begin is learn by doing. An investor can invest in a handful of stock. The situation of the market will force the investor to think about buying, selling or holding. It is much better than “paper transactions” that many tyros indulges, because the real holdings test the investor’s psychological reactions.

And this imply that one must invest time to study investments.

This initial experience fund should be very small, ideally not over 1o% of one’s asset. And time. If time is an issue, then you may be better off delegate the investment decision to the professional. This exercise also help you to discover if you are cut out for trading.

The author argues that beginner should do more short-term investing. Some people believe that there is more peace of mind if one simply keeps a stock for a long pull. Experience seems to contradict this claim. It is because many ‘long term’ investors ignore change of market condition. They may be correct in short term, but may pay a dear price in the long run.

Short term method requires the closing of a trade for a good reason. If the condition changes again, then one can choose to re-establish a position again.

Quick link to The Battle for Investment Survival by Gerald M. Loeb